Richard D. Wolff

Follow up: About inflation and monetizing the Government debt through too much Govt deficit spending.. This is the skinny. People paid down debt during the Financial Crisis. The economy stabilized and people began the take on more private debt. This rebound in increased private debt. caused an increase in employment that added some more Private debt. Govt debt is being “monetized” by private debt.

The Banksters and Wall Street win coming and going!

Dr Wolff gets things right until the very end a bit on inflation. The money being created by deficit spending isn’t enough to cause much inflation, and is dwarfed by the money created for the banksters directly. It’s a bit of a technicality, but important because the inflation language leaves his argument open to being picked apart by something that is gaining some acceptance in conventional economics that is true. Banks don’t lend from deposits (reserves), but to private loan demand. In a nutshell banks make loans first and worry about reserves later. Increasing the money in the banking system was done to stimulate private lending by increasing reserves. All that money creation within the banking system got trapped there and wasn’t all that inflationary, because there was no demand/or qualified borrowers for private loans and lent the money to the Government at interest, like Dr Wolff said that’s INSANE and of no meaningful to the Commoners. Wall Street benefited too from the pumping of that money into the Financial System by inflating the prices of stocks and asset prices. Inflated asset prices can cause some inflation. All this money printing for the Financial System caused Income and Wealth to flow like crazy to the top, and as usual the little people got screwed.

I wholeheartedly agree with Dr. Wolff that this printing of money benefited the banksters/Wall Street, and was pernicious to the people. I disagree on the technicality of it being inflationary. Hell, a little inflation created by Government deficits would be be a good sign. It would mean more is in the hands of the people.

I quite agree with the fellow below. Wolff’s analysis is missing out because he doesn’t take the Modern Monetary Theory (MMT) perspective. Seeing as how he has a professional relationship with Stephanie Kelton (Bernie Sanders’s economic adviser and MMT leading-light) he ought to know better. His followers would benefit from learning MMT.

Interested parties should start here: http://moslereconomics.com/mandatory-readings/innocent-frauds/

or here: https://www.youtube.com/channel/UCWXGA051bB7uXlvsiGjvOxw/

IMHO Richard Wolff has gotten something wrong here.. or is at least missing something about the problem today.
Richard is correct in pointing out that inflation is the result of a currency chasing scarcity, however that is not the problem most stores and business complain about, for them the problem is a lack of customers, they effectively have a problem of over production.

The problem is that customers (consumers/working people) do not have enough money in their pockets to spend in stores due to low wage.

MMT (Modern Monetary Theory, a part of Keynesian style economics) has a few memes that are useful ways of thinking about some aspects of Govt and money.

ie, Govt does not need taxes to balance budgets.. if a Govt collects money as tax it can shred all the money and just print more.

The function of tax is to steer economies towards good outcomes, ie, by reducing inequality and stagnant capital held by the rich (which is a problem in the 1st world modern economies).
Taxes also give a currency value as people need to earn the currency or exchange wealth for the currency to pay taxes and for licences etc.

The problem is not that there is too much money.. it is that money is distributed to the rich who have never had so much money, by some accounts, there is more inequality now than at any point in human history (if trickle-down worked the economy would be in clover)
The problem is that there is too much inequality.. regular people have so little money that they cannot spend.
Where the rich are spending money it is on things that are harmful to the economy, such as ‘rent-seeking’ activity, ie, buying buy to rent properties.. they borrow money from banks (private debt) which bids up property prices and thus increases rents.. which sucks money from working people to the banks (which make money from interests on private debts).

With the Govt printing money for quantitative easing, the money went to the banks.. this is because the banks had produced Ponzi schemes chasing the bidding up of property with euphoric expectations that prices would continue to be bid up (to unsustainable levels).

Just from a capitalist/Keynesian point of view, some things that would help the economy would be taxing stagnant capital and producing to reduce inequality, and “quantitative easing for the people” (mechanisms to give regular people more money)..

These are political decisions.. Govts are not like family budgets.

Some of the above references work by Steve Keen and his Minsky dynamic systems simulations/ models of the economy.

Forgive me if I seem critical by making the above points.. just adding to the debate.
Richard Wolff undoubtedly knows about the above and has limited himself to explaining some aspects of how the capitalist system works.
ie, Democracy at Work recently shared a Guardian article by Edward Helmore entitled
"
‘People aren’t spending’: stores close doors in ‘oversaturated’ US retail market
"